2025 (4) TMI 168 - HC - GST

Hindu family head escapes GST penalties after NOIDA admits depositing tax under wrong head, ordered compensation

The HC held that the petitioner, as head of a Hindu Undivided Family, should not suffer penalties under GST Act due to NOIDA's mistake in depositing GST ... Liability of petitioner, as the head of a Hindu Undivided Family, for penalties under the GST Act - amount towards the GST payment, has been deposited under wrong head - HELD THAT:- The payment of GST deposited by the petitioner was accepted by NOIDA. Further, they also admitted depositing of the GST amount under the wrong head. The NOIDA had attributed its mistake upon tax consultant by whom the advise was taken. In turn, the NOIDA accepts its mistake for non-deposit of the due tax so paid by the petitioner under the proper heads. The Hon’ble Apex Court in the case of Batliboi Environmental Engineers Limited Vs. Hindustan Petroleum Corporation Limited an Another, [2023 (9) TMI 1186 - SUPREME COURT], has held that computation of compensation should not be whimsical and absurd resulting in a windfall and bounty for one party at the expense of the other and the damages should be commensurate with the loss sustained by the party. Since the quantification against the petitioner along with penalty has been made of Rs. 19,22,778/-, which has been confirmed by the appellate authority, a Writ of Mandamus under Article 226 of the Constitution of India is issued to the respondent no.4 i.e. NOIDA to pay/compensate the amount of Rs. 19,22,778/- to the petitioner within 15 days from today. After making the said payment to the petitioner, the NOIDA shall intimate about the same to the District Magistrate, Gautam Buddh Nagar within the said period - The NOIDA is at liberty to recover the said amount from the erring officer of its department. Conclusion - The petitioner should not suffer due to NOIDA's mistake in depositing the GST under the wrong head, the penalties imposed are unjustified. Petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the petitioner, as the head of a Hindu Undivided Family, is liable for penalties under the GST Act despite having paid the GST to NOIDA, which was deposited under the wrong head.Whether the NOIDA authority's error in depositing the GST under the wrong head justifies the imposition of tax and penalties on the petitioner.Whether the petitioner is entitled to compensation from NOIDA for the penalties imposed due to NOIDA's error.The appropriate remedy or compensation for the petitioner given the circumstances.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Liability for Penalties under the GST Act- Relevant legal framework and precedents: The proceedings were initiated under Section 61 and Section 73(1) of the CGST Act, which pertain to the scrutiny of returns and determination of tax not paid, respectively.- Court's interpretation and reasoning: The Court noted that the petitioner had indeed paid the GST amount to NOIDA, which was undisputedly accepted. However, due to NOIDA's error, the GST was deposited under the wrong head.- Key evidence and findings: The counter affidavit by NOIDA confirmed the payment by the petitioner and the subsequent error in depositing the amount under the wrong head.- Application of law to facts: The Court applied the provisions of the GST Act and found that the petitioner should not be penalized for NOIDA's mistake in depositing the GST under an incorrect head.- Treatment of competing arguments: The Standing Counsel argued that the petitioner was liable as the GST was not properly deposited. However, the Court found that the petitioner had fulfilled his obligations by paying the GST to NOIDA.- Conclusions: The Court concluded that the petitioner should not be penalized for NOIDA's mistake.Issue 2: Compensation for Penalties Imposed- Relevant legal framework and precedents: The Court referenced the precedent set by the Supreme Court in Batliboi Environmental Engineers Limited Vs. Hindustan Petroleum Corporation Limited, emphasizing that compensation should be commensurate with the loss sustained.- Court's interpretation and reasoning: The Court reasoned that since the petitioner had paid the GST to NOIDA, and the error was on NOIDA's part, the petitioner should be compensated for the penalties imposed.- Key evidence and findings: The admission by NOIDA in its counter affidavit that the GST was deposited under the wrong head was crucial.- Application of law to facts: The Court applied the principle of fair compensation, determining that NOIDA should compensate the petitioner for the penalties imposed.- Treatment of competing arguments: The Court dismissed arguments that the petitioner should bear the penalty, emphasizing NOIDA's responsibility for the error.- Conclusions: The Court concluded that NOIDA should compensate the petitioner for the penalties imposed due to its error.3. SIGNIFICANT HOLDINGS- The Court held that the petitioner should not suffer due to NOIDA's mistake in depositing the GST under the wrong head, and therefore, the penalties imposed were unjustified.- The Court issued a Writ of Mandamus directing NOIDA to compensate the petitioner with the amount of Rs. 19,22,778/- within 15 days, emphasizing that the compensation should be commensurate with the loss sustained.- The Court stated, 'the petitioner cannot be permitted to suffer to the mistake committed on the part of NOIDA,' establishing a core principle that errors by authorities should not result in penalties for compliant taxpayers.- The Court instructed NOIDA to recover the compensation amount from the erring officer responsible for the mistake.- The Court provided a mechanism for enforcement, directing the District Magistrate to recover the compensation from NOIDA if it fails to comply, ensuring accountability and enforcement of its order.